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2025 Market Risks: Pullback Causers vs. Rally Killers

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Why Did Stocks Drop Last Week?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • 2025 Market Risks: Pullback Causers vs. Rally Killers

Futures are lower with EU shares as escalating geopolitical tensions are driving risk-off money flows this morning.

Overnight, Russian President Putin approved a doctrine that lowered the threshold for the use of nuclear weapons and shortly thereafter, Ukraine reportedly launched their first long-range ballistic missile attack on targets in Russia prompting risk-off/safe-haven money flows.

Economically, Eurozone HICP (CPI equivalent) was inline in October with a headline of 2.0% y/y and 2.7% y/y Core which did not materially move markets amid the geopolitical developments.

Today, the fluid geopolitical situation in between Russia and Ukraine will be in focus as the uncertainties surrounding the next steps in the conflict will likely drive risk-aversion until some degree of clarity emerges.

Domestically, there is one economic report due to be released: Housing Starts (1.3M) and two Fed speakers to watch: Goolsbee (12:25 p.m. ET) and Schmid (1:10 p.m. ET). Barring a big surprise in the data or any meaningfully dovish or hawkish changes in rhetoric, the data and Fed speakers will not likely move markets materially.

Finally, on the earnings front we will get quarterly results from WMT ($0.53), LOW ($2.81) and MDT ($1.24) today.

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The Growth Scare Is Here (What It Means for Markets)

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The Growth Scare Is Here (What It Means for Markets): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Growth Scare Is Here (What It Means for Markets)
  • Weekly Market Preview:  How Far Can This Pullback Go?
  • Weekly Economic Cheat Sheet:  Important Growth Report Today

Futures are plunging globally on snowballing concerns about economic growth following Friday’s soft jobs report.

Global growth concerns are the main reason behind the stock weakness but technical factors are majorly at play, as the Nikkei fell 12% on Monday (not a typo) despite no real, negative news (other than a continued yen rally).

Economically, actual data was solid overnight as both the EU and UK Composite PMIs slightly best estimates but that’s being ignored in the global selloff.

Today the key number is the ISM Services PMI (E: 51.0) and this number needs to print back above 50 (and ideally above expectations) to help stocks stabilize.  If we see another sub-50 number or it’s worse than last month, expect growth concerns to intensify and for this selloff to worsen.

For the Fed, there is one speaker today, Daly at 5:00 p.m. ET, but she shouldn’t move markets.

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Over the past two weeks, we’ve seen deterioration on multiple fronts

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Over the past two weeks, we’ve seen deterioration on multiple fronts: Tom Essaye Quoted in Barron’s

Nasdaq Off Lows as Bond Yields Pull Back

Sevens Report Research’s Tom Essaye told Barron’s in a phone interview that markets had a rosy outlook two weeks ago as traders bet on solid growth, stable yields, and hopes of near-term rate cuts.

“Over the past two weeks, we’ve seen deterioration on multiple fronts,” Essaye says. “Yields are now much higher, the Fed is not going to cut nearly as much as expected, and geopolitical risks are now bubbling up again.”

Essaye believes higher yields and worries that the Federal Reserve will turn to fewer rate cuts than expected has been the biggest problem for markets.

“The market was extremely aggressive on valuation, and central to that valuation is the idea of Fed rate cuts and lowered yields,” Essaye says. “Because that has been removed, the valuation for markets must come down. And that’s exactly what’s happening.”

Also, click here to view the full Barron’s article published on April 16th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to RallyIf you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

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The CPI release didn’t counter existing market narratives

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The market views it as keeping the Fed on schedule for June rate cuts: Tom Essaye Quoted in Barron’s

Stocks Are Rallying. Inflation Report Keeps the Fed on Track.

Sevens Report Research’s Tom Essaye told Barron’s in a phone interview that while the headline figure didn’t meet expectations, the numbers didn’t counter existing market narratives.

“People still very much subscribe to the idea that housing is artificially inflating CPI, and that whenever that begins to work its way out of the data, the number will move down even more quickly than it is,” Essaye says. “Nothing in this report refuted that, and so as a result, I think that the market views it as keeping the Fed on schedule for June rate cuts.”

“For now, the script is still in place,” Essaye says. “The issue markets have is that it’s already priced in, so we need to find the next new catalyst.”

Also, click here to view the full Barron’s article published on March 13th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to Rally

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The market is mostly in a holding pattern to start the week

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The market is mostly in a holding pattern to start the week: Tom Essaye Quoted in Barron’s

Nasdaq Snaps 2-Day Losing Streak

“The market is mostly in a holding pattern to start the week,” Sevens Report Research’s Tom Essaye told Barron’s in a phone interview. “The big numbers come on Thursday, with all these inflation updates.

It is not just in the U.S. with core PCE, but also in Europe. Depending on what happens there will dictate whether or not this market can grind higher.”

Also, click here to view the full Barron’s article published on February 27th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to Rally

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

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Sevens Report Research’s Tom Essaye Quoted In Barron’s

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Sevens Report Research’s Tom Essaye Quoted In Barron’s

Nasdaq Loses Steam as Stocks Give Back Some Earlier Gains

Sevens Report Research’s Tom Essaye told Barron’s that the Federal Reserve Bank of New York released median inflation expectations from its January survey that were unchanged at the one- and five-year ahead horizons. But three-year expectations fell to 2.4% from 2.6%.

“That will make the Fed more confident in cutting rates and amidst an other wise quiet day, that’s what’s driving this market,” Essaye said.

Also, click here to view the full Barron’s article published on February 13th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to Rally

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

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Markets Have Aggressively Priced In No Recession Or Slowdown

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Markets Have Aggressively Priced In No Recession Or Slowdown: Sevens Report Analysts Quoted in Investing.com

Dow Jones, Nasdaq, S&P 500 weekly preview: Eyeing record highs

“Markets have aggressively priced in no recession or slowdown, but that’s premature. The economy could easily slow and there are some signals slowing growth is happening,” analysts at Sevens Report said.

Sevens Report analysts: “For this rally to continue, we can’t have economic data suddenly start to miss expectations, because now that the Fed has made its dovish pivot, it can’t help markets if worries about an economic slowdown rise. That’s why we’re watching economic data closely at the start of the year.”

Also, click here to view the full Investing.com article published on December 18th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Lastly, If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Market Multiple Table: December Update

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Market Multiple Table: December Update: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Table – December Update (Unbranded Copy Available)
  • Chart – 10-Yr Yield Violates Long-Term Uptrend, 2023 Lows in Focus

Stock futures are slightly higher and bond yields are falling modestly this morning. This is as traders digest a dovish BOJ decision and largely in-line Eurozone inflation report.

The Bank of Japan left their benchmark policy rate unchanged at -0.10%. With no hint of a January rate hike sending the yen down >1% and the Nikkei up nearly 1.5% overnight.

Economically, the Eurozone HICP Narrow-Core inflation rate favorably fell from 4.2% to 3.6% last month, meeting estimates.

Looking at today’s potential market catalysts, there is one economic report to watch: Housing Starts (E: 1.360 million), and two Fed officials are to speak: Bostic (12:30 p.m. ET) and Goolsbee (6:00 p.m. ET).

Lastly, as long as the housing market data is not a big shock, the release shouldn’t move markets this morning while Bostic’s comments will be closely watched to see if he joins Daly and others from the Fed in acknowledging concerns about the labor market (which would add a dovish tailwind).

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Bull vs. Bear Case: Part II

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Bull vs. Bear Case: Part II: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Bull Case vs. The Bear Case – Part II
  • Chart – Gold Breaks Out to the Upside
  • Consumer Confidence Data Points to Soft Landing

Stock futures are tracking European equities higher this morning while the 10-Yr Note yield is below 4.30% at two month lows following less-hawkish ECB commentary and more evidence of disinflation in the Eurozone.

Economically, Spanish CPI fell to 3.2% vs. (E) 3.7% y/y while multiple regional German inflation prints suggest headline German CPI will come in well below the 3.5% estimate later this morning.

The ECB’s Stournaras notably said in commentary early this morning that rate cuts could come as soon as the middle of next year which saw more policy easing priced into rates futures markets in Europe and invited new bids into the bond markets.

Looking into today’s session, there are two domestic economic reports to watch this morning: GDP (E: 4.9%) and International Trade in Goods (E: -$86.7B) while there is just one Fed speaker in the afternoon: Mester (1:45 p.m. ET).

Bottom line, the early bid in the U.S. equity futures market and new lows in bond yields are being driven by cooler-than-expected inflation data in the EU, so it will be critical for the German CPI report to come in below estimates of 3.5% when the data is released at 8:00 a.m. ET. If so, expect the dovish rally to extend into Wall Street trading today.

Bull vs. Bear Case: Part II

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Core PCE Reading Was Inline With Expectations

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Core PCE Reading Was Inline With Expectations: Tom Essaye Quoted in Barron’s

S&P 500 Joins Nasdaq in Correction Territory

Sevens Report Research’s Tom Essaye told Barron’s the core PCE reading was inline with expectations but didn’t eliminate the risk of inflation rebounding.

He added that Amazon and Intel’s earnings didn’t outweigh what has been a bad week overall.

“And, while there’s progress in Washington, markets won’t celebrate the Republicans being able to finally elect a speaker, and there’s still the prospect of a government shutdown looming,” Essaye added.

Also, click here to view the full Barron’s article published on October 28th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to Rally

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.